Hi,
Firstly thanks for your time!
We currently own our PPOR in Sydney with around $300,000 equity in it (property worth around $850K). We can stay where we are and pay it off, then buy our investment properties or we can sell, use this equity to buy a few properties and rent.
Obviously there is more to it but this is the basis of the decision we are making at the moment.
To make our money work harder for us we are thinking of selling and using the equity.
What would you do? Any advice appreciated.
Thanks!
PetaI would work on the figures
What is rent going to cost , What the likely cost of investment loan each week, what is the cost of rates, insurance, ect each week
What is the likely rental income each week.
Can you get a rental property to rent to live in . This may be a harder task than you are aware of due to low vacancy rates.
Work on the cash flow side of things to see if you can afford to do this. Factor in 3 months a year without a tenant and how you can afford the vacancy.It really is a hard question as it really is personal choice.
A PPOR has the CGT exemption but the interest payments on the mortgage are not deductible as well as any expenses incurred.
An investment property has slight tax benefits with the expenses incurred being refunded by your marginal tax rate. But Capital gains are taxed later.You can use the equity without selling by borrowing against it. 850k * 80% =680,000 value of house approx $550,000
You could borrow via an L.O.C $130,000 as a deposit and borrow what ever else up to $500,000 that is needed for an investment loan with another bank.
What you may need to do is look at the cash flow to see how much a second property could cost you using a line of credit with your first property.
So you want to sell a property to buy another?
I would worry about selling now – at a low point in the market. Selling costs, buying costs on the repurchase, the loss of the main residence CGT exemption and land tax exemption.
Why not just access some of the equity and then use this as deposits on new properties. AS long as you have the income, you should be able to get a loan up to 90% of the value of the property (less existing loans = money released).
You could also look at moving out and renting and negative gearing your place – save tax, and still retain the CGT exemption for up to 6 years. But this is a lot of hassle and will depend on the figures and your lifestyle.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
See Peta
Other great minds think alike.
Richard Taylor | Australia's leading private lender
Duckster, Terry and Richard,
Thanks for taking the time to reply! We really appreciate it!
Peta
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